Litigation Trends to Watch in 2024
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Court and Legal Litigation Trends to Watch in 2024: Drop in TDF Suits, More Forfeiture Complaints There is good and bad news when it comes to the litigation targeting defined contribution plan fiduciaries in 2024, according to attorneys from Faegre Drinker Biddle & Reath LLP. In one area of class action complaint, attempts to sue plan fiduciaries for choosing one type of low-cost target-date fund versus other options appear to be petering out, in part due to a string of losses. However, an area of increased litigation, and focus, is emerging in a series of complaints targeting how retirement plan forfeitures are being used by plan sponsors. Source: Planadviser.com 2023 Retirement Plan Litigation Highlights According to a recent report, from 2019 to mid-2022, over 200 class action lawsuits were filed against 401k plans, fiduciaries, and plan sponsors. Companies spent over $150 million to settle those lawsuits. To provide plan fiduciaries with an update regarding some of the most recent litigation in the industry, this article reviews some of these lawsuits including some lessons for plan sponsors. Source: Conradsiegel.com Longstanding Internal Revenue Service Position Called Into Question The Internal Revenue Service's longstanding position has been that forfeitures in a tax-qualified defined contribution plan can be used in only three ways: payment of reasonable plan expenses; reduction of employer contributions; or allocation to plan participants. Recently, several class action lawsuits have been filed challenging the permissibility of plan language providing discretion as to how forfeitures should be used. Source: Wagnerlawgroup.com 401k Excessive Fee Suit Parties Strike Settlement After years of hard-fought litigation, the parties in an excessive fee suit have come to terms, including cash and "other non-monetary relief." Participant-plaintiffs -- on behalf of the ISO 401k Savings and Employee Stock Ownership Plan -- have submitted an Unopposed Motion for Preliminary Approval of Class Action Settlement for the court's approval. Source: Napa-net.org Lack of "Meaningful Benchmark" Bounces Another 401k Excessive Fee Suit Fiduciaries of a relatively small 401k plan have fended off an excessive fee suit with a federal judge finding no "meaningful benchmark" against which to assess a fiduciary violation. Source: Napa-net.org »» Click here for more Court and Other Legal Issues Insight: Studies, Research, Analysis, and White Papers Gen Xers Are Really Bad Retirement Savers: Report It's a massive gap. Generation X says it will take $1,112,183 in savings to retire comfortably, yet they expect to have $661,013 saved. The $451,170 difference tops the expected shortfall facing Millennials and Baby Boomers. According to a new Schroders survey, 45% of non-retired Gen Xers say they have not done any retirement planning, compared to 43% of Millennials and 30% of non-retired Baby Boomers. Source: Napa-net.org »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers DOL's Fiduciary Rule Faces Uncertain Future The Department of Labor's fiduciary rule faces a "rocky road" ahead due to expected litigation, despite regulators pushing to finalize the rule, according to Jason Bortz, the Capital Group's senior counsel. Although regulators are motivated to finalize the rule, it will likely face litigation, says Bortz. Source: Planadviser.com What's Driving Heightened Plan Adviser RFPs? Retirement plan advisers often partner with plan sponsors to put out requests for proposal for plan service providers. These days, however, more and more advisers are finding themselves on the other side of an RFP. A robust RFP market creates both risks and rewards for plan advisers. But unlike years ago, when plan sponsors may have been looking at the basics of getting fiduciary retirement plan advisement, their needs are more robust in the modern qualified plan market. Source: Planadviser.com Fiduciary Rule Proposal Faces 1st Day of Dissent, Advocacy The Department of Labor's Employees Benefit Security Administration on Tuesday hosted the first of two days of public comment on its proposed retirement security rule, also known as the fiduciary adviser rule, with dissenters and advocates taking turns on a live-streamed hearing. The DOL's Retirement Security rule is seen as overbearing by some, and necessary by others. Source: Planadviser.com Legislative and Washington DC New Bill Seeks to Allow Roth IRA Rollovers into Roth 401ks Legislation introduced in House would correct oversight of current law prohibiting workers from rolling Roth IRA savings into workplace-based Roth retirement plans offered by employers. Source: 401kspecialistmag.com »» Click here for more on Legislative and Washington Actions Cyber and Plan Security Retirement Plans and Cybersecurity: Insights for Plan Sponsors With the increased regulatory focus and greater awareness of cyber vulnerabilities within the retirement plan industry, plan sponsors are looking for ways to meet their fiduciary responsibility in mitigating retirement plan cybersecurity risk. This article covers a few of the currently available ways in which sponsors can address the risk. Source: Berrydunn.com ERISA Fiduciary Concerns Relating to Cybersecurity: Part I -- Theft of Plan Assets Since a cyber breach is not a matter of if it will occur, but a matter of when, fiduciaries of retirement plans should be addressing this risk. This article discusses the Department of Labor's authority over cybercrimes, litigation involving cyber theft of participants' accounts, and risk mitigation techniques for plan fiduciaries. Source: Plusblog.org »» Click here for more on Cybersecurity Issues Compliance and Regulatory Proposed Regulation for Long-Term Part-Time Employees: Plan Sponsors Time to Act Effective Jan. 1, 2024, employers who sponsor 401k plans must allow employees who work at least 500 hours a year over consecutive years to be eligible to make deferrals into the plan. This change requires immediate action by plan sponsors to change the way they administer their plans, specifically, counting service hours and increasing eligibility for LTPT employees. Source: Employeebenefitslawreport.com Long-Term, Part-Time Employee (LTPTE) Regulations Proposed by IRS On November 27, 2023, the IRS released proposed regulations addressing the new rules for long-term, part-time employees under tax-qualified retirement plans, including 401k plans. Generally, effective for taxable years beginning after December 31, 2020, the SECURE Act requires plans to permit eligible employees who complete at least three consecutive 12-month periods of service, in which they complete more than 500 hours of service in each of the 12-month periods, to contribute to the plan. Source: Compliancedashboard.net New Distribution Options to Encourage Savings SECURE 2.0 includes several provisions designed to encourage workers to save more for retirement. Although it may seem counter-intuitive, one way Congress attempted to do this is by ensuring that those who do contribute have access to their accounts when they need it. To that end, SECURE 2.0 created at least four new types of distributions and made changes to several others. Source: Dwc401k.com 401k Loans: Debunking the Myths The retirement industry has long debated the need for and use of 401k loans. Many think that borrowing from a retirement account is sacrificing long-term financial security for a short-term fix. But what if retirement loans are just misunderstood? Research reveals an evolved perspective and approach to retirement loans. Source: 401kspecialistmag.com »» Click here for more Compliance and Regulatory Material Marketplace News Carson Group Snags $1.2B Retirement, Wealth Advisory Edelman Financial Engines Acquires New England Pension Plan Systems Keybank Institutional Advisors Launches the Key 401k Pooled Employer Plan Alera Group Acquires Fraser Group
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